Reports » US

US stock market daily report (February 17, 2012, Friday)

Contributed by Millennium Traders

House and Senate lawmakers - in a rare show of bipartisanship voted Friday to extend a two-percentage-point payroll-tax cut for the rest of the year, sending legislation to President Barack Obama nearly two weeks before a tax hike would have gone into effect for nearly 160 million Americans. House lawmakers voted 293-132 and Senate voted 60-36 to approve the bill that will extend the current 4.2% payroll tax through the end of 2012, as well as extend prolonged jobless benefits and prevent payment cuts for Medicare doctors. Republicans earlier this week dropped their insistence that the payroll-tax cut be offset by spending cuts elsewhere. “This is a compromise and not everyone likes everything in here,” said Rep. Dave Camp of Michigan, who chairs the House Ways and Means Committee. The Congressional Budget Office said the package adds $89.3 billion to the deficit over 10 years. The bill gradually reduces the maximum duration of extended jobless benefits from 99 weeks to 73 weeks. The bill is also paid for by among other things sales of broadband spectrum and a cut of $5 billion to a public-health fund that is part of Obama’s health-care law.

Labor Department reported Friday that U.S. consumer prices for January increased at the largest rate since September. On the month, consumer price index rose a seasonally adjusted 0.2%. Energy prices rose 0.2% last month, the first increase since September. Core CPI, the measure of retail-level inflation that strips out food and energy prices to get a better handle on underlying inflationary trends, increased 0.2% on a seasonally adjusted basis. Since summer, core prices have been increasing at a rate of either 0.1% or 0.2%. Over the past 12 months, the CPI is up 2.9% and inflation has been moderating after hitting a 3.9% annual rate in September 2011. Core CPI is up 2.3% over the past year striking the largest gain since September 2008. Federal Reserve officials said that they expect inflation to moderate in the near term after last year’s spike in commodity prices. With prices rising 0.2% for urban workers and average hourly earnings up 0.2%, on an inflation-adjusted /real basis, weekly earnings were seen as flat during January; tobacco prices increased 0.5% and apparel prices rose 0.9%. Over the past year, real weekly earnings are down 1.0% and housing prices were up 1.9%. In January - housing prices were up 0.1%; owners equivalent rent rose 0.2%; food prices rose 0.2%; prices of food purchased to consume at home were flat; energy prices rose 0.2% including a 0.9% increase in gasoline prices.

Late Thursday, Lehman Brothers Holdings and its creditors said they want to subpoena Treasury Secretary Timothy Geithner - who was president of the Federal Reserve Bank of New York at the time of the Lehman collapse - to question him under oath over allegations J.P. Morgan Chase & Co. illegally siphoned billions of dollars from the collapsing investment bank in the days prior to the filing of the largest bankruptcy in U.S. history. Lehman's official committee of unsecured creditors said Geithner has refused to comply with an August 9, 2011 subpoena and wants a court to force Geithner to give a deposition by a March 16 deadline. "Despite being a crucial fact witness on these issues, Secretary Geithner has refused to appear at a deposition in accordance with a valid subpoena issued by the Committee," the committee's lawyers said in the filing. The committee said in its filing that it additionally wants to question then-Treasury Secretary Hank Paulson but he too has turned the request down. The committee said in its filing that Geithner had more than 35 phone conversations with then-Lehman Chief Executive Richard Fuld and more than 10 with J.P. Morgan Chief Executive Jamie Dimon in the week before Lehman's September 2008 bankruptcy filing. Lawyers for Lehman subpoenaed Geithner as part of a civil lawsuit against J.P. Morgan claiming Dimon and other top executives used inside knowledge to take advantage of Lehman as its financial state worsened. The weekend before Lehman's monumental bankruptcy filing, the Geithner-led New York Fed became the meeting place for Wall Street titans and Washington policy makers trying to sort things out. The committee said in its court papers, "The Department of the Treasury now turns its back on the President's commitment to transparency as it refuses to provide the creditors of Lehman Brothers with key evidence from the current Secretary of the Treasury, Timothy F. Geithner, who was a crucial witness to certain key events at issue in the creditors' litigation with JPMorgan Chase Bank." In May 2011 Lehman Brothers sued J.P. Morgan in U.S. Bankruptcy Court in Manhattan, charging the bank demanded over $8.6 billion in collateral in September 2008, triggering a liquidity squeeze that contributed to Lehman Brothers' collapse. The estate is hoping to recoup billions in collateral the bank demanded, and other damages. J.P. Morgan, which served as Lehman's clearing bank, countersued, claiming Lehman tricked it into lending $70 billion in the days following the investment bank's September 2008 collapse and left it with toxic securities that Lehman's own traders referred to as "goat pooh." J.P. Morgan says Lehman led it to believe it would be repaid the $70 billion advanced to keep Lehman's broker-dealer business afloat in the days surrounding Lehman's historic bankruptcy filing and the sale of its core business to Barclays PLC. Lehman wants to question Min Euoo-sung former chairman and chief executive of Korea Development Bank - under oath -who was a key potential bidder for Lehman weeks and months leading up to its bankruptcy. Lehman claims J.P. Morgan sought to advise KDB with respect to the Lehman deal and its lawyers want to ask Min if J.P. Morgan may have learned that it wasn't going to bid for Lehman before that information became public, prompting the bank's call for more collateral.

A spokesman for German Chancellor Angela Merkel said European leaders expect euro-zone finance ministers to reach agreement Monday on a long-delayed second bailout for Greece. In a conference call Friday - Merkel, Greek Prime Minister Lucas Papademos and Italian Prime Minister Mario Monti discussed the situation and are 'confident' that the ministers will 'find a solution to outstanding issues'. Greece would still be required to complete a list of 24 'prior actions' before the end of February as a condition for releasing the aid. An agreement by euro-zone finance ministers on Monday would likely be followed by the launch of a long-awaited, voluntary, private-sector bond swap that aims to knock 100 billion Euros off of Greece’s debt load. In order for Greece to avoid a hard default on March 20, the private-sector-bond swap must be initiated next week.